Extra Space Storage (EXR) Q1 Earnings: What's In Store?

Extra Space Storage Inc. (NYSE:EXR) is slated to report first-quarter 2018 results on May 1, after the market closes. Both its revenues and funds from operations (FFO) are expected to register year-over-year growth.

In the last reported quarter, this Salt Lake City, UT-based self-storage real estate investment trust (REIT) delivered a positive surprise of 3.7%, in terms of FFO per share. Results reflected growth in property-rental revenues and improvement in same-store net operating income (NOI). Higher occupancy and rental rates also supported growth.

The company has a decent surprise history. In fact, it exceeded the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 3.8%. This is depicted in the graph below:

Let’s see how things are shaping up for this announcement.

Factors That Might Impact Q1 Results

Extra Space Storage is the second largest self-storage operator in the United States, as well as the largest self-storage management company in the nation. The company offers a wide array of well-located storage units to its customers, including boat storage, recreational vehicle storage and business storage. It enjoys high brand value and robust presence in key cities.

The company also made concerted efforts to consistently grow its business, and achieve geographical diversity through accretive acquisitions, mutually beneficial joint-venture partnerships and third-party management services.

In addition, the self-storage industry is anticipated to witness solid demand, backed by favorable demographic changes and events like marriages, shifting, death, and even divorce. Amid these, in the soon-to-be-reported quarter, the company is anticipated to benefit from steady demand in the self-storage industry, and record growth in same-store revenues and NOI.

The Zacks Consensus Estimate of $251 million for property rental revenue reflects a sequential rise from the prior-quarter figure of $246 million. The estimate for management fees and other income is pegged at $10.5 million, up from $10.1 million in the previous quarter. Moreover, the Zacks Consensus Estimate for first-quarter total revenues is pegged at $286.8 million, indicating a year-over-year rise of 9.0%.

However, Extra Space Storage operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. In addition, there is a development boom of self-storage units in many markets. This will likely fuel competition for the company, curb its power to raise rents, and turn on more discounting.

Prior to the first-quarter earnings release, there is lack of any solid catalyst for raising optimism about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for FFO per share for the first quarter remained unchanged at $1.09, over the past month. However, it indicates a year-over-year increase of 5.8%.

Additionally, shares of Extra Space Storage have gained 3.0% in the past three months, outperforming the 6.7% decline registered by its industry.

Earnings Whispers

Our proven model does not conclusively show that Extra Space Storage will likely beat estimates this season. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) — for this to happen. However, that is not the case here as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The company has an Earnings ESP of -0.73%.

Zacks Rank: Extra Space Storage’s Zacks Rank #2 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

Taubman Centers, Inc. (NYSE:TCO) , slated to release earnings on Apr 26, has an Earnings ESP of +0.47% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Simon Property Group, Inc. (NYSE:SPG) , scheduled to report quarterly numbers on Apr 27, has an Earnings ESP of +0.32% and a Zacks Rank #3.

Pebblebrook Hotel Trust (NYSE:PEB) , set to release first-quarter results on Apr 26, has an Earnings ESP of +8.31% and a Zacks Rank #3.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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